Economic Reports 07/27/07
Summary: Sung to The Carpenters We've Only Just Begun...
U of Wolverine Consumer Sentiment much like equities shows misguided public ebullience in an environment wrought with unusually high risk.
Sung to Elton John's I've Seen That Movie Too... Advance GDP with a disclaimer and headline growth, another ebullient misread on smoke and mirrors..
A surge in non residential commercial construction masked sharp declines in consumer spending (66% of GDP) and residential construction (80% of new jobs since 2000).
Transitory government spending and a trade deficit "reduction" (based on lowered domestic demand & dollar debauching) also puffed up the number.
Mich Sentiment-Rev. Jul 90.4 vs 85.3 Press Release
Inside the number: Ebullience... "Just 19% of all consumers expected the economy to worsen in the year ahead, and nearly half of all consumers expected favorable conditions in the economy to persist to at least mid-2008."
Reality... downside risks to consumers sunny outlook are "unusually large": "The number of delinquent mortgages has grown not only in the sub prime market but also among consumers that have variable rate mortgages.
While the vast majority of consumers are not directly affected, consumers may not correctly anticipate the risk to their finances from the negative cascades that could be set into motion by the housing meltdown."
Moreover, "the (housing) fallout has just begun, with mortgage rate resets expected to mount during late 2007 and early 2008."
GDP-Adv. Q2 +3.4% vs prior +0.6% Full Report
Inside the number: The disclaimer... "The Bureau emphasized that the second-quarter "advance" estimates are based on source data that are incomplete or subject to further revision by the source agency.
The second-quarter "preliminary" estimates, based on more comprehensive data, will be released on August 30, 2007."
"The acceleration in real GDP growth in the second quarter primarily reflected a downturn in imports, upturns in federal government spending and in private inventory investment,
accelerations in exports and in nonresidential structures, and a smaller decrease in residential fixed investment that were partly offset by a notable deceleration in PCE."
Headline growth on previously committed long term non residential commercial projects, a backup in inventories and one off government spending.
Offsetting sharp declines in consumer spending and residential project spending. Meanwhile, a "reduction" in the trade deficit added 1.18 points to growth.
Q2 Consumer spending decelerating +1.3% vs prior +3.7%; real disposable income shrinking -0.8% vs +5.9%; savings rate declining +0.6% vs +1.1%.
Q2 vs Q1: spending on durables +1.6% vs +8.8%; services +2.2% vs 3.1%; non durables -0.8% vs +3%, the weakest in 16 years as the consumer spending continues to slow.
Meanwhile, stagflation in full bloom as the price index for gross domestic purchases, which measures prices paid by U.S. residents, increased 3.9% in the Q2 vs 3.8% in the first.
Headline inflation increasing +4.3%, the fastest since 1990. Chain Deflator-Adv. Q2 +2.7% vs prior +4.2%. Core +1.4% vs +2.4%
Business investment +8.1% on +$3.6 Billion inventory increase vs Q1 +$100 Million, thats a nice back up in the pipeline which added +0.15 points to "growth".
Also, Q2 residential investment dropping -9.3% vs Q1 -16.3%; while investment in structures +22.1%, the highest since 1994 on previously committed to projects. Adding 0.66 points to "growth".
A transitory Q2 defense spending increase of 9.5% vs Q1 -10.8%. Yesterday's durable orders confirms the government spending pipeline for Iraq war weapons systems and the Katrina rebuild is almost dried up.
Non defense spending +1.3% vs Q1 +3.8% confirms the above. Government spending accounted for +0.82 points of "growth".
Much like the corporate quarterly reports , as we slow down, domestic consumption falls, imports fell 2.6% vs +3.9%; (goods -2.4%; services -4%).
The confetti dollar is being devalued, so export prices increased 6.4% vs Q1 +1.1%. Much like Greenspans "productivity miracle" this "reduction" in the trade deficit added 1.18 points to "growth".
1.18 trade deficit "reduction" + 0.82 points guvmint spending + 0.15 inventory build + 0.66 non residential structures = 2.81 points out of 3.4. Leaving the rest of the "economy" with a net growth rate of 0.59%.
Government spending will continue to curtail as tax receipts plunge for federal, local & state governments. The trade deficit "reduction" will vanish as the global economy slows along with ours.
For the last year, already planned, approved and committed private commericial projects have propped up what remains of the "durable" economy.
Much like the last housing bust, while the emasculated economy runs out of gas, said commercial pipeline will run dry as private investors and corporate pull their horns back and cinch their belts.
Unlike the last housing bust, when we still had a pre globalization durable economic base to fall back on...
As we have nattered before many a time, this emasculated service based Mc Jobs economy has no legs to stand on nor a fallback position in the event of a serious economic downturn.
The $15 Trillion questions are: will 0.6% residual organic growth suffice? and...
What will happen to the major contributor to GDP (1.91 points of growth from the service sector) as housing plunges, the consumer pulls back and the economy slows further?
U of Wolverine Consumer Sentiment much like equities shows misguided public ebullience in an environment wrought with unusually high risk.
Sung to Elton John's I've Seen That Movie Too... Advance GDP with a disclaimer and headline growth, another ebullient misread on smoke and mirrors..
A surge in non residential commercial construction masked sharp declines in consumer spending (66% of GDP) and residential construction (80% of new jobs since 2000).
Transitory government spending and a trade deficit "reduction" (based on lowered domestic demand & dollar debauching) also puffed up the number.
Mich Sentiment-Rev. Jul 90.4 vs 85.3 Press Release
Inside the number: Ebullience... "Just 19% of all consumers expected the economy to worsen in the year ahead, and nearly half of all consumers expected favorable conditions in the economy to persist to at least mid-2008."
Reality... downside risks to consumers sunny outlook are "unusually large": "The number of delinquent mortgages has grown not only in the sub prime market but also among consumers that have variable rate mortgages.
While the vast majority of consumers are not directly affected, consumers may not correctly anticipate the risk to their finances from the negative cascades that could be set into motion by the housing meltdown."
Moreover, "the (housing) fallout has just begun, with mortgage rate resets expected to mount during late 2007 and early 2008."
GDP-Adv. Q2 +3.4% vs prior +0.6% Full Report
Inside the number: The disclaimer... "The Bureau emphasized that the second-quarter "advance" estimates are based on source data that are incomplete or subject to further revision by the source agency.
The second-quarter "preliminary" estimates, based on more comprehensive data, will be released on August 30, 2007."
"The acceleration in real GDP growth in the second quarter primarily reflected a downturn in imports, upturns in federal government spending and in private inventory investment,
accelerations in exports and in nonresidential structures, and a smaller decrease in residential fixed investment that were partly offset by a notable deceleration in PCE."
Headline growth on previously committed long term non residential commercial projects, a backup in inventories and one off government spending.
Offsetting sharp declines in consumer spending and residential project spending. Meanwhile, a "reduction" in the trade deficit added 1.18 points to growth.
Q2 Consumer spending decelerating +1.3% vs prior +3.7%; real disposable income shrinking -0.8% vs +5.9%; savings rate declining +0.6% vs +1.1%.
Q2 vs Q1: spending on durables +1.6% vs +8.8%; services +2.2% vs 3.1%; non durables -0.8% vs +3%, the weakest in 16 years as the consumer spending continues to slow.
Meanwhile, stagflation in full bloom as the price index for gross domestic purchases, which measures prices paid by U.S. residents, increased 3.9% in the Q2 vs 3.8% in the first.
Headline inflation increasing +4.3%, the fastest since 1990. Chain Deflator-Adv. Q2 +2.7% vs prior +4.2%. Core +1.4% vs +2.4%
Business investment +8.1% on +$3.6 Billion inventory increase vs Q1 +$100 Million, thats a nice back up in the pipeline which added +0.15 points to "growth".
Also, Q2 residential investment dropping -9.3% vs Q1 -16.3%; while investment in structures +22.1%, the highest since 1994 on previously committed to projects. Adding 0.66 points to "growth".
A transitory Q2 defense spending increase of 9.5% vs Q1 -10.8%. Yesterday's durable orders confirms the government spending pipeline for Iraq war weapons systems and the Katrina rebuild is almost dried up.
Non defense spending +1.3% vs Q1 +3.8% confirms the above. Government spending accounted for +0.82 points of "growth".
Much like the corporate quarterly reports , as we slow down, domestic consumption falls, imports fell 2.6% vs +3.9%; (goods -2.4%; services -4%).
The confetti dollar is being devalued, so export prices increased 6.4% vs Q1 +1.1%. Much like Greenspans "productivity miracle" this "reduction" in the trade deficit added 1.18 points to "growth".
1.18 trade deficit "reduction" + 0.82 points guvmint spending + 0.15 inventory build + 0.66 non residential structures = 2.81 points out of 3.4. Leaving the rest of the "economy" with a net growth rate of 0.59%.
Government spending will continue to curtail as tax receipts plunge for federal, local & state governments. The trade deficit "reduction" will vanish as the global economy slows along with ours.
For the last year, already planned, approved and committed private commericial projects have propped up what remains of the "durable" economy.
Much like the last housing bust, while the emasculated economy runs out of gas, said commercial pipeline will run dry as private investors and corporate pull their horns back and cinch their belts.
Unlike the last housing bust, when we still had a pre globalization durable economic base to fall back on...
As we have nattered before many a time, this emasculated service based Mc Jobs economy has no legs to stand on nor a fallback position in the event of a serious economic downturn.
The $15 Trillion questions are: will 0.6% residual organic growth suffice? and...
What will happen to the major contributor to GDP (1.91 points of growth from the service sector) as housing plunges, the consumer pulls back and the economy slows further?
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